This year's Executive Brief returned for the third time to the now familiar Stapleford Park in Rutland. Held on the 15th and 16th of September, the twin themes for the event were "Politics & Regulation and the Future". The delegate list as ever contained a good spread across each of our major sectors, but especially encouraging this year was the first time presence of a number of new customers, including Royal Mail, The Identity and Passport Service, Premier Foods and the RSPCA. Given the twin themes there was also a strong representation from the world of politics and regulation in the form of Lord O'Neill of Clackmannan, Tom Winsor and our own William Hague and Steven Norris.

Some of the details are reported here, although the event operates under Chatham House Rules so some details have been withheld.

The event featured presentations from the following:

• The Rt Hon William Hague MP
  

    

• Chris Le Fevre, Director LeFevre Consulting
  
  
• Lord O'Neill of Clackmannan
  

    

• Nigel Hawkins, Analyst, Libertas Capital
  
  
  
• Tom Winsor, Partner White and Case (formerly the Rail and International Rail Regulator.)
  
  
  
• Steven Norris, Chairman, AMT-SYBEX
  
  
• Ian Pearson, Futurologist, Futurizon
  
  
• Paul Cuttill, OBE (formerly COO of EDF Energy)

DAY ONE - POLITICS AND REGULATION


Chris Le Ferve, "The best of all possible worlds" or "Another fine mess?"

      

The overall theme of  Chris' presentation was that if we accepted that the regulatory system is in need of overhaul the next question is whether the fix can be delivered by "tinkering" or demands a more radical approach. From his own career he was now in the useful position of poacher turned gamekeeper and so brought a very interesting perspective to the debate. The presentation began by giving a useful review of how economic regulation had developed and performed. The story was not all bad - indeed there had been a number of high points and successes:

• Shake up of traditional industries - massive cost reductions, changes in mind-set etc.
• Established important principles regarding separation, non-discrimination and ability to finance functions.
• Through the periodic review, established a degree of stability that allowed sustained investment planning and a reduction in cost of capital.
• Played an important role in project managing the change within the respective industries.
• Reduced energy charges (not withstanding recent trends.)
• Reduced cuts in supply.
• Improved customer service.
• Reduced opex - year after year.
• Increased investment.
  
  

The position in which regulators and the regulated found themselves was that the easy wins had been achieved and the challenge was now to drive out the smaller wins via incentives. The slog of the 5 year periodic review model was highly complex and combative in the face of entrenched positions on both sides.

The key issues now were:

• Periodic Review and RPI-X - too much "gaming" by companies distorting the results.
• Investment and the cost of capital. The approach to determining cost of capital (WACC) can be seen as a one-way bet for companies and shareholders.
• Market Failure - the rise in environmental issues and the shortcomings of the UK regime having been developed from international influences.
  
  

Moving on Chris then gave us an International perspective to regulation - how did others do it?

• US system includes Federal and State oversight, highly legalistic, some tussles over jurisdiction (LNG terminals) and range of approaches to issues such as retail competition.
• Germany - single network regulator (BNetzA) covering energy, telecomms, rail and post. Energy regulation heavily influenced by primary legislation.
• Elsewhere in Europe most regulators combine gas and electricity. Norway and NI also include water. EU regulators increasingly working together through CEER, ERGEG etc.
• Australia - moved from state to federal energy body (AER).
• Russia - Federal and regional tariff agencies plus host of ministries with varying roles. Anti-Monopoly Service can also be influencial. Transport unbundling in electricity and oil but not in gas. 

Finally as something of a foretaste of the Day 2 focus, Chris did some crystal ball gazing of his own to what the future might hold for regulation. In echoing many of the points in William Hague's presentation he added the following:

• The need to "work with the grain of regulation".
• Both business and regulatory objectives have to be met - it is not an either/or solution.
• The emerging role of competition authorities in terms of influence and pressure was important to note and often generated a "get tough" behaviour from the regulator.
• The possible increase in "mutualisation" of utilities - e.g. Northern Ireland Water and Network Rail.

In the Q&A session which followed answers included:

• The credit crunch is likely to be causing some international owners of UK utilities to be revising their view of UK assets - downwards!
• In the growth area of LNG it was felt that competition should be encouraged - it was likely to lead to over, rather than under, capacity and was therefore good for security of supply.
• There was no easy answer to the challenge of reconciling the apparent conflict between government policy and the regularity view.

DAY TWO - INNOVATION AND THE FUTURE


Steve Norris, "The only thing we know about the future is that it isn't what we think it is going to be"

The intriguing theme for the second day was introduced by Steven via some spectacular and amusing instances of where humankind has guessed the future wrong:

• "Man will never reach the moon regardless of all future scientific advances" - Dr.Lee de Forest.
• "There is no likelihood man will ever tap the power of the atom" - Robert Millikan, Nobel Prize for Physics 1923.
• "Computers of the future may weigh no more than 1.5 tons" - Popular Mechanics Magazine 1949.
• " I think there is a world market for maybe five computers" - Thomas Warttson, Chairman of IBM 1943.
• "There is no reason anyone would want a computer in their home" - Ken Olson, President Digital Equipment Corporation 1977.
  
  

Add to this, seismic events such as the tearing down of the Berlin Wall - which in turn signalled the death of the USA v USSR strategy of MAD (Mutually Assured Destruction) and the invention and spread of the internet.

In economics the rapid rise to prominence and likely future domination of China followed by Brazil and India has caught the West unawares and is scrabbling to come to terms with this development.

The negative and serious reverse of the coin is, of course, the largely unforeseen re-emergence of the international terrorism on the 9/11 scale - and the resultant conflict between theocracy and technology; the realisation of climate change and the global warming implications with extreme weather fluctuations, prolonged drought and damage to the ice caps.

These were only a few of the examples (good and bad) which were used to illustrate the point that in looking to the future - anyone's guess is as good as anyone else's.

Ian Pearson, "A Trip to the Future"

Taking his cue perfectly, Ian took delegates on a hugely entertaining, educational and at times scary view of what might be - even in our own lifetimes. As a sort of corporate palm reader he explained that he essentially worked on the premise that 85% of the future is predictable from the technology of the day - blurred vision is better than none at all. He simply selects the "solid" and discards the "dodgy" and "hey presto" the future emerges! What was important was not whose view was right but that some kind of view was at least being put together. Darwin did not talk about the "survival of the fittest" but about "the survival of the most able to adapt."

One very interesting thread was around the replacement of man by machines. Ian's extended view is that the process is actually going to go full circle - as more and more functions are taken on by machines so the processes which can only be done by human beings are identified and the need for them actually increases rather than diminishes. This could be called the "care" economy and given that women tend to be better at interpersonal skills than men, could lead to the domination by women of the workplace.

Finally looking at the challenge of climate change, Ian put forward the view that far from accelerating the process, technology actually has the capacity to ease our burden on our environment. He used some incredible examples of capacity for the desert areas of the world to be utilised to generate many times the demand we have for energy now and in the future - all that these technologies needed was the critical mass to exploit them.

After Dinner Speaker Rebecca Romero

AMT-SYBEX has been supporting the British Olympic Appeal during the run-up to the 2008 Games and was pleased to announce that Beijing Gold Medallist Rebecca Romero would be an after dinner speaker at the AMT-SYBEX event.


Rebecca is seen below with Andy Miller Group Managing Director of AMT-SYBEX, at Stapleford Park.

    

She has a unique CV within the sporting world and  now adds the Olympic gold to her collection from major international events. Whilst competing as a Rower, she achieved great successes by becoming a World Champion and an Olympic Silver medallist. She has moved on to Cycling, and after winning a silver medal in the 2007 World Championships, she went on to become a double World Champion at the 2008 championships in Manchester. In Beijing she became the second athlete in summer Olympic Games history to win medals in different sports. Rebecca produced an outstanding ride and claimed the woman's individual pursuit gold in Beijing on Sunday 17th August.